The Western Cape High Court has ordered a company to honour a R1 million verbal agreement for share ownership.
The case's background reveals a complex narrative marked by friendship and trust gone awry between the involved parties. David Johnson and David Alexandra Kruyer, entered into a business relationship in 2009, which eventually developed into a personal friendship.
Kruyer became one of the Johnson’s best friends. They visited each other’s homes, went for meals and spent weekends staying in each other’s houses. They held a number of discussions pertaining to him becoming a shareholder in Concargo.
During December 2012 Johnson moved to Johannesburg on the understanding that he would establish a branch and be a director of Concargo Distribution, and that he would be representing the company in the city.
He testified that towards the end of April 2013 they had agreed that he would invest R1 million into the company and in return he would be given a 5% shareholding therein. Johnson assumed that this 5% shareholding would come from either the Kruyer or he and his wife, as they were, in his understanding, the existing shareholders of the company.
He testified that during July 2013 he paid the R1 million into the cheque account of the company. He also testified that payment into this account was done on the Kruyer’s instruction. Kruyer had told him that he would receive 5% shareholding in exchange for the R1 million investment, which he had no reason to disbelieve. However, notwithstanding the payment of the nvestment, Johnson did not receive the 5% shareholding.
In his testimony, Kruyer said that it was his understanding that the payment of R1 million was made with the objective of funding Concargo Distributions Johannesburg and that the money would be accounted for on a managed report basis on a monthly basis to see what the drawdown was.
He denied that he had told the Johnson to deposit R1 million into the business’s account and assumed that he had done so as that was the account number he had in hand. He said he understood that the Johannesburg office would be operated at Johnson’s risk. According to him, it was never their agreement that the Johnson would receive 5% shareholding in the company, and the payment of the R1 million was simply an at-risk investment.
During January 2015 Johnson instituted action proceedings against the company and others and pleaded that he and the company, duly represented by the Kruyer, concluded a verbal subscription agreement.
On 26 February 2024, a lower court had found that “Johnson has succeeded in establishing the existence of an agreement with Concargo on the terms alleged. It is common cause that Johnson paid the R1 million to Concargo but did not receive the promised shares. He is accordingly entitled to restitution of the amount he paid to Concargo. However, On 31 May 2024 the court granted the company leave to appeal.
The crux of the court's judgment hinged on the interpretation and verification of the alleged agreements. The presiding judges highlighted critical issues, including whether Johnson proved the existence of the subscription agreement or an alternative sale agreement, and whether the initial court misjudged the credibility of the testimony presented.
Ultimately, the court found Johnson's evidence credible, with Judge Sarah Matthews stating in her judgment, "The evidence presented demonstrates a clear and enforceable agreement, despite its verbal nature. It matters not that the first respondent did not know who the seller was when all his negotiations were conducted with the second respondent."
Concargo's appeal argued that the lower court had erred in its findings, claiming that Johnson failed to substantiate his agreement. However, the judges reaffirmed that Johnson's oral agreement for subscription held weight, given the trust dynamics and the nature of their dealings.
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